After months or even years, you have made it to the finish line; the judge just declared you divorced. It is time to take a deep sigh of relief or maybe even throw back some cocktails. It is undoubtedly a moment to reflect upon and to take some time for yourself. But the days, weeks, and months following the divorce finalization are crucial. While you may want relief from the paperwork, debating with attorneys and other professionals, or worrying about your financial affairs, this post-divorce checklist details seven steps to consider implementing after your divorce and as soon as possible:
Take time to review your marital settlement agreement. Then get organized by creating a one-pager with key terminology, critical dates that require action, and the responsible party for action completion. It will help alleviate additional stress if you start by prioritizing time-sensitive items first.
If you were rewarded the primary home in the divorce, the title should be changed as soon as possible. Retitling can be done efficiently through a quitclaim deed. Remember that ownership of a home and the debt owed through a mortgage are two separate issues. A quitclaim deed will change joint ownership of the house into sole ownership, allowing the owner to sell or mortgage the property without the approval or consent from the other party. However, this does NOT change any obligation owed to the mortgage lender. You and your ex-spouse are both still on the hook to ensure the monthly mortgage payments are made timely. Any other assets such as vehicles or boats should also be retitled, which can be done through your local DMV. If your ex-spouse is involved in an accident and is at fault, you could be held liable if your name is still on the car title. This small detail on jointly owned vehicles is often overlooked after a divorce but is a very significant part of your to-do list.
Close all joint debts.
Another essential task is closing and canceling all joint credit cards and removing your spouse as an authorized user. Joint accounts that remain open could come back to hurt you financially. The last thing you want to happen is your ex-spouse running up charges on the joint credit card or over drafting the joint checking account. If you have a balance that cannot be paid off, it is vital to call the credit card company and instruct them to suspend the card and not permit any future purchases. One important step that we encourage clients to do is to sign up for a credit report monitoring service, like LifeLock. These services allow you to monitor your credit report for any suspicious activity or errors. Not handling credit discrepancies or ensuring certain accounts are closed can hinder your ability to obtain a new mortgage or loan in the future.
Update your health insurance.
Finding new health insurance should be a priority if your ex’s health insurance coverage covered you. If you were already covered, you may opt into your ex-spouse’s insurance coverage through COBRA and can keep coverage for 36 months after divorce. However, COBRA coverage could be substantially more expensive than purchasing a private policy directly through your state’s health insurance marketplace. If you are currently working, a change in marital status is a qualifying event that allows you to opt in even after open enrollment closes.
Change your beneficiaries.
You might be under the impression that you do not need to check your accounts since you have updated your will. Still, your beneficiary designations supersede whatever is specified in your will. To say this another way, even if you have changed your will to reflect different wishes, your ex-spouse could still inherit certain assets unless you have specifically changed your beneficiary designations. If you do not have a will, this is a great time to create one. It is essential to change your beneficiaries to match your new post-divorce wishes. Make sure you update all accounts such as 401(k)s, 403(b)s, IRAs, ROTH IRAs, life insurance through your employer or on individual policies, transfer or payable on death registrations, brokerage accounts, and any other type of instrument on which a named beneficiary is designated.
Create a new financial plan.
It will be crucial to update your financial plan after your divorce. This will allow you to analyze your unique financial situation to control how much you should be saving for retirement, what your new budget may look like, and make the most financially out of your new life. Analyzing your investments will be something your advisor could help you work through, especially if your ex-spouse was the primary point person in this area. You may now own unfamiliar items that are no longer the right fit for your new financial situation. Your financial professional will be able to help you create a new investment allocation that is appropriate for your specific situation, help you analyze the tax consequences of your investment portfolio, and help with any investment replacements. Creating a financial plan helps determine how best to achieve your post-divorce goals, so it is crucial to work with a professional to design your own unique financial road map.
Last, but certainly not least, assemble your financial team.
It is important to work with a CERTIFIED FINANCIAL PLANNER™ (CFP®) who can help you coordinate with other professionals like an accountant, insurance agent, and estate planning attorney. Your divorce may alter your tax bracket, deductions, and credits, leaving you with a different tax liability than in years past. Your financial advisor and CPA can work together to run analyses to help better prepare you for the upcoming tax year.
Working with a professional, like a CERTIFIED FINANCIAL DIVORCE ANALYST™ (CDFA®), who has experience working with divorce clients, would be able to advise you better on this transitional experience based on your income, deductions, and new tax filing status. A CDFA® has experience working through what you are going through now and can help navigate some confusing but essential issues.
Bridgeworth advisor Susan Copeland holds both her CFP® and CDFA® and serves clients by applying her unique background and skillset to help divorcees work through the complexities of financial planning before, during, and after a divorce.
This content does not constitute legal, tax, accounting, financial, or investment advice. Based on your specific circumstances, you are encouraged to consult with competent legal, tax, accounting, financial, or investment professionals. We do not make any warranties as to the accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of February 9th, 2022, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Bridgeworth, LLC to be reliable, are not necessarily all-inclusive, and are not guaranteed as to accuracy.